It started with a food scare in Portugal nine years ago, and it ended last
week in high farce in Brussels.

The subject of the furore was a Europe-wide ban on what – until now – had never seemed much of a transgression: the practice of restaurants serving olive oil in jugs or dipping bowls.

Critics called the ban “bonkers” and “barmy”; its proponents said it was vital to stop unscrupulous restaurateurs passing off cheap oil as the more expensive extra virgin variety.

The upshot was restaurants would have to spend a small fortune buying in specially prepared bottles of tamper-proof olive oil to serve to customers, many of whom had never realised there was a problem in the first place.

The Sunday Telegraph can today piece together the tale of the Great Open Bottle Olive Oil Ban. It is a story of vested interests, powerful lobbyists and an apparent failure of democratic accountability.

It involves a byzantine voting system known as comitology – of which more later – which allows bureaucrats to vote in secret.

The ban would have affected the eating habits of half a billion people in 27 European countries.

Costly, wasteful and environmentally unfriendly, it was of no obvious benefit to diners who enjoy dipping bread into olive oil served in bowls in restaurants.

On Thursday – nine days after the regulation was agreed in secrecy at an obscure European Union committee meeting – the measure was withdrawn.

But only after its existence had been revealed by The Telegraph on the afternoon of the previous Friday, causing such a media storm that the embarrassed commissioner in charge of agriculture rescinded it.

Critics say that how the European Union came to endorse such a regulation in the first place reveals in microcosm all that is wrong with its inner workings.

The origins of the ban were in Portugal in 2004 with a clamour to clamp down on fraudulent restaurateurs passing off cheap oil as a quality product.

The scale of the fraud there is disputed, but whatever the truth, the upshot was a move to tighten the law.

In January 2005, the country passed legislation requiring tamper-proof, non-refillable olive oil bottles in restaurants and cafés.

According to the legislation, the oil should be presented in “packs with an opening system that loses its integrity after the first use and are not reusable”. Any breach was liable to a fine of between £650 and £38,000.

Casa do Azeite, Portugal’s olive oil association, was delighted with the ban, which helped to boost sales. “Consumption of olive oil, especially extra virgin, has greatly increased, though not only due to this law,” explained Mariana Matos, the association’s general secretary, in January.

“Five years ago, per capita consumption was about 6kg [13lb] per year and now it’s more than 8kg per year, and rising.”

In 2006, Italy passed a similar measure.

Wind the clock forward to the economic crash of 2008 and southern Europe’s olive oil industry was feeling the squeeze. Consumption had been rising steadily across Europe for two decades but suddenly, while demand was still rising, the price was falling significantly.

Expensive extra virgin olive oil was being switched for the cheapest products, some imported from north Africa and Turkey. By 2010, farmers were starting to go under.

In Spain, which produces about 60 per cent of Europe’s olive oil, the price had collapsed by about 15 per cent in 2009.

“Pre-2008 I was getting a wholesale price of €2.70 (£2.31) for a kilo of olive oil,” explained Charles Butler Mackay, a Canadian living in Jaen, Andalusia, Spain, who harvests oil from 8,000 trees grown on 100 hectares.

“That price dropped to as little as €1.80 (£1.54) after the crash.”

By June 2009, the EU’s Advisory Group on Olives and Derived Products was calling for a “strategic agenda” to combat falling prices.

There are dozens – probably hundreds – of such advisory groups in the EU. Meetings are not open to the public or press.

The olive advisory group meets about twice a year and is chaired by an EU official. But key advisers come from Copa-Cogeca, one of the most powerful lobbying groups in Europe, which boasts of representing the interests of 70 groups – including Britain’s National Farmers Union – and 26 million farmers Europe-wide. In 2011, the most recent year for which figures are available, it received half a million euros in EU funding for its various activities.

Copa-Cogeca has impressive clout and a hotline to Dacian Ciolos. Mr Ciolos’s name may mean nothing in Britain but the Romanian agriculturalist is one of the most powerful figures in the EU.

He was appointed the EU’s Agriculture Commissioner in February 2010 and was sympathetic to the plight of southern Europe’s olive oil growers.

In all there are 27 commissioners, with portfolios ranging from competition to climate action, who preside over about 270 “comitology” committees, which have the power to implement directives without the need for a vote in the European Parliament.

Experts estimate that the various committees implement as many as 2,500 regulations a year, compared with about 50 directives passed by MEPs.

By 2012, a drought in southern Spain reduced the olive crop by as much as 50 per cent, while Greece was suffering from “very low prices”.

With the industry in despair, about 18 months ago, a 10-strong delegation from Copa-Cogeca, led by Rafael Sanchez de Puerta, a Spanish farmer, met Mr Ciolos in Brussels.

That was followed in April 2012, with a trip by Mr Ciolos to Cordoba, the Spanish city that lies at the heart of the olive region.

There he met Interprofesional del Aceite de Oliva Español, which represents the country’s olive oil producers, as well as the country’s agriculture minister.

At this meeting, the Spanish lobbying group put forward a series of measures to revive the industry. Mr Ciolos left with an olive oil action plan.

Measures included: an insistence that the EU’s generous subsidy for olive oil producers be maintained in the face of pressure to reform; increased financing of olive oil storage by effectively creating a “lake” to regulate supply; the introduction of quality tests – a move that would wreck imports from outside the EU; and tucked away, a first public mention that “olive oil in restaurants be served in properly labelled bottles”.

The 2012 Action Plan – with its EU backing – was critical, containing a clause to “encourage member states to require the use in the hotel and catering industries of packages that cannot be reused”.

By the time the regulation was put forward for a vote, the wording had changed to: “These establishments should also be obliged to use oil bottles equipped with an opening system which cannot be resealed after the first time it is opened, together with a protection system preventing them from being reused once the contents indicated on the label have been finished.”

In February, it was put to the vote at the Management Committee for the Common Organisation of Agricultural Markets, one of the comitology committees, and 15 out of 27 member states voted for the ban, including the big producers of Spain, Italy, Greece and Portugal.

Britain, at the time embroiled in the horsemeat scandal, felt it “awkward” to vote against what on the face of it seemed a food labelling measure and sent a civil servant from London to Brussels to abstain.

Others, like the Dutch, voted against the regulation and it failed because it had no “qualified majority”.

But – and here is where it gets even more complicated – the opposition was not strong enough to defeat the proposal either, so the measure came back before the committee on May 14, and this time around, the commissioner was in a position to push it through because of the earlier stalemate.

The backlash against Mr Ciolos’s decision was felt immediately; the northern European countries were fuming.

By last Monday Owen Paterson, the Environment Secretary, was being shown around the Chelsea Flower Show. He had had no idea of the vote and demanded to know how it had come about.

In fact, The Sunday Telegraph understands, only the farming minister David Heath, a Liberal Democrat, had been told of the proposal by his civil servants but he was not – it is presumed – aware of the full consequences when Britain abstained rather than vote against it.

By Thursday, Mr Ciolos was performing a humiliating about-turn. Proof, says the EU, that the commission is accountable.

A spokesman said: “It has now announced it will not proceed with the ban – because having listened to a wide range of views from stakeholders, national politicians, media and public it became clear that it did not command wide support.”

But Open Europe, a think tank that campaigns for a reformed EU, says the whole episode is evidence of the problems.

“That these plans advanced as far as they did reflects both the EU’s obsession with micromanagement, as well as the opaque nature in which many EU regulations are drawn up,” said Pawel Swidlicki, research analyst at Open Europe.

“This whole sorry episode risks further entrenching the perception that the EU is too exposed to lobbying interests and out of touch with public opinion.”

Meanwhile, Copa-Cogeca is furious. “It’s terrible as the measure was meant to protect consumers against fraud by banning refillable bottles so that restaurants cannot refill them with different types of olive oil and other oils,” said a spokesman.

“It has been discussed and assessed for over a year in a transparent and open way in all the relevant EU committees and EU advisory groups with all member states’ representatives and all stakeholders, from industry to consumers.

“The measure has already been introduced in southern countries like Portugal and the impact on costs for restaurants is negligible.

“It’s absurd that such a small measure that was meant to benefit both consumers and producers should receive such a reaction and that there could be such a huge U-turn by the EU Commission in a matter of days as a result of political pressure.”